HomeRegional NewsAfricaThe big question: Mitigating the impact of COVID-19 on economic growth

The big question: Mitigating the impact of COVID-19 on economic growth

The Big Question we asked the experts is: What interventions should policymakers implement to mitigate the impact of the COVID-19 pandemic on economic growth and enhance resilience to future shocks?

The article first appeared in ESI Africa Issue 4-2020.
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A gradual shift toward investments and net exports, and the move away from private consumption resulted in over 50% of Africa’s GDP growth as of 2019. A tremendous improvement for the first time in a decade. However, this was publicised by the African Development Bank in January 2020 before the COVID-19 pandemic hit Africa.

Now Africa’s economic growth is anticipated to recover to 3% in 2021 from -3.4% in 2020, provided that governments manage the COVID-19 infection rate well. The African Economic Outlook 2020 – Supplement maintains that the growth outlook for 2021 and beyond would depend on policies to reopen economies.

William Hynes
OECD’s Acting Head of the New Approaches to Economic Challenges Unit, France

The COVID-19 crisis highlights the dire consequences of failing to appreciate and manage the characteristics of complex global systems. Resilience, or the ability to recover from and adapt to unexpected threats, has been a focus of specific parts of our system; for instance military and public health authorities.

But the notions of viability and resilience can be in tension with short-term profitability and apparent efficiency. The disastrous consequences of COVID-19 show that resilience must become a core philosophy within system management and operations to ensure we are able to continue to function in the midst of disruptions from COVID-19. The policy response should be twofold: address immediate concerns, and propose an approach to dealing with the longer-term issues the pandemic highlights.

In the short-term, that means identifying the people and activities most affected, assessing how measures to help them will impact others, and underlining that difficult trade-offs between health, economic, social, and other goals are inevitable. In the longer-term, an approach that reacts to the systemic origins and impacts of major shocks is needed if policies are to be effective.

The COVID-19 crisis also shows how important it is to keep resources in reserve for times when unexpected upheavals in the system prevent it from functioning normally (and the argument can be made for not depleting natural resources). Furthermore, given the interdependence of our economies and social systems, the pandemic highlights the need for strengthened international cooperation (building on existing frameworks for emergency preparedness), based on evidence to tackle systemic threats and help avert systemic collapse.

Elton Jangale
Partner at Bowmans, Malawi

Policymakers should look to maintain momentum for the implementation of the African Continental Free Trade Area (AfCFTA) and use available trade facilitation measures to counter rising trade costs and to limit the economic and human impact of the pandemic.

In the short-term, introduce interventions such as a pandemic trade impact mitigation facility. While for the medium- to long-term, interventions such as deliberate development of Africa’s infrastructure including multi-modal transport networks, would give a strong boost to intra-African trade.

We need to be more innovative in dealing with high cross-border tariffs on goods. The issue of free or easy movement of people (labour) also remains a challenge in many ways and requires innovation. Using technology to facilitate identification, such as the introduction of an electronic continental identification card, might be one of the ways of opening up free movement of labour around the continent.

Kieran Whyte
Partner and Head of the Energy, Mining & Infrastructure Practice at Baker McKenzie, South Africa

There can be no real development in Africa without drastically improved access to affordable, reliable and sustainable power. Post-COVID-19, solutions to address Africa’s power crisis must consider the energy transition: in particular, the use of renewable energy; the focus on smart power technologies and cost-effective solutions; and the global drive towards a decentralised, decarbonised and secure energy supply that addresses climate change and stimulates economic growth.

In the South African Energy Risk Report 2020, the South African National Energy Association (SANEA) outlined how clean energy could aid the country’s economic recovery post-pandemic. However, it noted that for the energy transition to take place, primary and associated infrastructure gaps should be addressed. Further, policy and legal frameworks must change to facilitate investment.

The African Union (AU) Commission and the International Renewable Energy Agency (IRENA) agreed in May 2020 to work together to alleviate the impact of COVID-19 and ensure that Africa could meet its development goals. The focus was on supporting the development and adoption of innovative renewable energy technologies, improving access to energy, building more resilient energy systems, mobilising international support, developing larger and more robust power markets, and encouraging cross-border trade of renewable power.

The combination of technology-enabled, cost-effective renewable energy, the decentralisation of energy production, and improvements in energy storage, smart metering and other digital technology have the potential to revolutionise the way power is generated and consumed in Africa. New systems and networks can be designed around future environmental stressors and energy demands. With advanced use of mobile technology in Africa and the lack of modern expansive electricity transmission networks, these developments provide an opportunity for African communities to gain access to power by leapfrogging the traditional model of centralised generation and transmission of power.

Multilateral and development finance institutions have been important allies in the development and mobilisation of funding in Africa’s renewable energy sector. Of critical importance will be the assessment of existing supply chains that may have been affected by COVID-19, to facilitate the movement of goods on the continent. ESI